5 Myths of Estate Planning

By: Tracey Ullom, JD, CLU, Associate Counsel, John Hancock

In popular culture we often hear reference to “estate planning” in the context of the elderly or very wealthy. On screen we see a dying person whispering their last wishes to a loved one, or an attorney reading the will that provides a windfall inheritance to a long-lost, only living relative while disinheriting other heirs.  Off screen, the drama often plays out in the court system as a result of mistakes or oversights made in the planning process. However, these visible and sensationalized events are not the purpose of estate planning. In fact, estate planning is meant to do just the opposite of what we often see in the media and is not just for the old and wealthy. The following 5 Myths explain why everyone may wish to consider their estate plan and how they can start the process.

The Myths

Myth #1: I don’t own enough money or property to need an estate plan.

There is no magic dollar amount or type of property that creates an estate. Assuming that we are not part of a simulated Matrix-like reality, every one of us as an individual being has an “estate.” Your estate is the legal entity that steps into your shoes and continues to manage your day-to-day activities once you are no longer able to whether that occurs in-life or at-death. These activities can include financial, health and medical, or general wishes for family and property. Planning for your estate means that you have expressed and documented the choices that you would make and have chosen the person or persons who will be responsible for carrying them out. This could include naming a guardian for children or pets; expressing your medical decisions if you are in the hospital and unable to voice them yourself; or stating who would get any property that you own or may acquire. Your estate is more than money and property, it is you. While an estate plan does allow you to specifically give away money and property, it also helps your family and friends make the decisions that you would have made should they need to step in.  

Myth #2: I’m too young to do estate planning.

First, see the answer to Myth #1. Second, you are never too young to start planning for the unexpected.  In our youth we are all a bit invincible, and no one wants to think about all the what-ifs that would cause an estate plan to be necessary. However, most estate plan documents are flexible and can change over time as your needs and situation change. Those changes could include getting married, having kids, buying a house, or all the things that we dream of as we start to get older. Having an estate plan in place can only help you and your family should something happen. And, hopefully, you’ll have many opportunities and life events that require revisiting and updating your estate plan.  

Myth #3: Estate planning is too expensive.

There will likely be some cost to establishing a proper and complete estate plan. However, not all estate plans are created equal. The type of documents you need, and their complexity will have an impact on the cost. In addition, just as you would shop around for the right car mechanic, you should also shop around and talk to your network about estate planning attorneys in your area. Law firms are all different in the fees that they charge which could include either a flat fee or an hourly rate. The fees and expected total cost should be discussed in an initial conversation typically called the consultation or intake. This is the opportunity for you to interview the attorney and the firm to determine if the relationship is the right fit for what you need both in cost and services provided. Some firms may do a free consultation, or there may be a nominal fee.  

Myth #4: If something happens to me, my ________ (spouse, kids, parents) will get everything.

Without an estate plan that includes a will your assets will pass via your state’s intestacy laws. The application of the intestacy laws requires the involvement of the probate court which can be costly in both time and money. Under intestacy, the probate court will name an executor to manage the estate assets for the benefit of any surviving heirs. This court appointed executor may or may not be the same person you would have chosen to be in charge of your assets. All of your estate assets and your heirs will now be subject to the terms and restrictions of the intestacy laws and the court. While spouses and kids generally receive a majority of assets, the distribution may not take into account extenuating family circumstances such as blended families with step-children, unmarried domestic partners, or other friends or family that you would have liked to receive some portion of your estate. Also, refer to Myths #1 & #5 for reasons why property and assets are not the only reason to implement an estate plan.   

Myth #5: If I have a will, my estate plan is complete.

A will is an integral part of any estate plan; however, there are more documents that may be necessary to complete the plan. These additional documents may include a living trust, durable powers of attorney, and a living will. Working with your estate planning attorney, you will discuss the need for each of these documents among others. For some assets – such as retirement accounts, bank accounts, and life insurance – beneficiary designations will dictate how those assets are passed outside of the estate. Durable powers of attorney allow you to designate who will act on your behalf if you are not able to. This could even include different people depending on the type of decision being made, such as your spouse for health care decisions and a trusted friend or sibling for financial decisions. A living will outlines the medical treatment you would want – or not want – if you were ever incapacitated. Combined with the health care power of attorney, a living will makes your wishes known and may alleviate your family from having to make those difficult decisions if the situation ever arises. 

Conclusion

As you can see, having a properly executed and complete estate plan is not just for the old and wealthy. Making our wishes known ahead of time releases the burden from our families to have to figure it out on their own. The estate plan we put in place today is not set in stone. As we get older and (hopefully) build wealth, we always have the opportunity to change our minds and update the plan. Having an estate plan in place is just as much for the benefit of our loved ones as it is for ourselves. 

This article is not intended to provide financial advice. Anyone interested in these transactions or topics may want to seek advice based on his or her particular circumstances from independent professionals. It is intended to promote awareness and is for educational purposes only. Anyone interested in these transactions or topics may want to seek advice based on his or her particular circumstances from independent professionals. MLINY101521848-1